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Frequently asked questions about VAT for EU freelancers

Community Manager
Lena E Community Manager Member Since: Apr 7, 2015
251 of 316

Hi Perge,

 

The VAT charges detailed here are for the Upwork service fee, premium Upwork memberships, and purchases of Connects. Upwork doesn’t require anyone to have a VAT number, and we will charge VAT on the services above to freelancers and agencies within the EU unless they provide a valid VAT number.

 

 If you do not have a VAT number, here’s an example of what this would look like:

VAT Sample

(VAT rates vary by country. The example above assumes a 10% service fee and a 20% VAT rate)

Untitled
Active Member
Dennis K Member Since: Sep 20, 2016
252 of 316

Hello,

 

I have downloaded the invoices for the service fees Upwork charged me. I see that the seller's address (Upwork) is the one of the headquarters in the US, while also stating their EU VAT ID. Shouldn't there be the address of Upwork's European subsidiary together with their EU VAT ID instead?

 

And about the buyer's address (mine): Shouldn't there be the country prefix in front of my VAT ID (in my case PL for Poland)? The Polish tax authorities might not make a fuss about it, but tax authorities of other EU countries ('cough' Germany' cough') might not accept such invoices as legal documents.

 

Also, as every other EU freelancer I urgently need a copy of the invoice which Upwork sends on my behalf to my clients. If Upwork doesn't provide these copies, should I create another invoice in my own bookeeping system and send a copy of it to my clients just so that both my clients and I have matching invoice copies for bookkeeping purposes?

I even don't know if my European clients have a VAT ID, but I understand that the Reverse Charge (where my invoice amount is my company's net income) can be only applied when both parties have a EU VAT ID. So if my European client doesn't have it or is legally from outside the EU, do I need to calculate the VAT from the amount charged to that client and pay it myself to the tax authorities of my country while not being able to pass that VAT amount to the client? If yes, it would make it very unattractive to continue offering services on Upwork.

Community Guru
Joachim M Member Since: Mar 23, 2015
253 of 316

@Dennis K wrote:

Hello,

 

I have downloaded the invoices for the service fees Upwork charged me. I see that the seller's address (Upwork) is the one of the headquarters in the US, while also stating their EU VAT ID. Shouldn't there be the address of Upwork's European subsidiary together with their EU VAT ID instead?

 

No. They use the MOSS system with an EU VAT ID.

 

And about the buyer's address (mine): Shouldn't there be the country prefix in front of my VAT ID (in my case PL for Poland)? The Polish tax authorities might not make a fuss about it, but tax authorities of other EU countries ('cough' Germany' cough') might not accept such invoices as legal documents.

 

You can explain nearly anything to the German tax authorities. It just has to make sense.

 

Also, as every other EU freelancer I urgently need a copy of the invoice which Upwork sends on my behalf to my clients. If Upwork doesn't provide these copies, should I create another invoice in my own bookeeping system and send a copy of it to my clients just so that both my clients and I have matching invoice copies for bookkeeping purposes?

 

You should issue your own invoices. Whether or not you send it to your customer you need to discuss with them. Only my EU customers require my invoices. All the others are happy with what Upwork provides.

 

I even don't know if my European clients have a VAT ID, but I understand that the Reverse Charge (where my invoice amount is my company's net income) can be only applied when both parties have a EU VAT ID.

 

Not true. As you are supplying a service, not goods you don't necessarily need your customer's VAT ID. It has to be a commercial customer though. With commercial customers the tax authorities don't really care that much, they can deduct the importation VAT anyway from the VAT they charge.

 

So if my European client doesn't have it or is legally from outside the EU, do I need to calculate the VAT from the amount charged to that client and pay it myself to the tax authorities of my country while not being able to pass that VAT amount to the client? If yes, it would make it very unattractive to continue offering services on Upwork.

 

For sales to clients outside of the EU not VAT is to be charged.


 

Active Member
Dennis K Member Since: Sep 20, 2016
254 of 316

@Joachim M wrote:

 

You should issue your own invoices. Whether or not you send it to your customer you need to discuss with them. Only my EU customers require my invoices. All the others are happy with what Upwork provides.

 

I even don't know if my European clients have a VAT ID, but I understand that the Reverse Charge (where my invoice amount is my company's net income) can be only applied when both parties have a EU VAT ID.

 

Not true. As you are supplying a service, not goods you don't necessarily need your customer's VAT ID. It has to be a commercial customer though. With commercial customers the tax authorities don't really care that much, they can deduct the importation VAT anyway from the VAT they charge.

 


 

So I simply issue an invoice with Reverse Charge and without client's VAT ID of my EU clients?
Community Guru
Joachim M Member Since: Mar 23, 2015
255 of 316

@Dennis K wrote:

@Joachim M wrote:

 

You should issue your own invoices. Whether or not you send it to your customer you need to discuss with them. Only my EU customers require my invoices. All the others are happy with what Upwork provides.

 

I even don't know if my European clients have a VAT ID, but I understand that the Reverse Charge (where my invoice amount is my company's net income) can be only applied when both parties have a EU VAT ID.

 

Not true. As you are supplying a service, not goods you don't necessarily need your customer's VAT ID. It has to be a commercial customer though. With commercial customers the tax authorities don't really care that much, they can deduct the importation VAT anyway from the VAT they charge.

 


 

So I simply issue an invoice with Reverse Charge and without client's VAT ID of my EU clients?

Yes. That's what I do and no complaints in all these years so far. Revenue service also accepted everything. Have a look at the simplified  invoice on the bottom of the page: http://ec.europa.eu/taxation_customs/business/vat/eu-vat-rules-topic/vat-invoicing-rules_en and here http://europa.eu/youreurope/business/vat-customs/buy-sell/invoices/index_en.htm

 

or start on this page http://europa.eu/youreurope/business/vat-customs/buy-sell/index_en.htm and work your way through all the regulations. A nightmare.

 

On this page compare the differences between selling goods and services: http://europa.eu/youreurope/business/vat-customs/cross-border/index_en.htm Goods require the VAT ID of your customer, services don't; for whatever reason.

Active Member
Sandra L Member Since: Oct 12, 2016
256 of 316

Hello,

 

may I also ask a question in addition to the above explained method to simply issue your own invoices (as freelancer, in my case I have my own VAT number from Austria) to your clients, no matter if you send them or not, just to have your bookkeeping clean. 

My issue is, that I did not request payment from Upwork for a long time now, waiting for my official VAT number and companies bank account. Now I did transfer a substantial amount (covering a couple of months and several clients jobs) and have to report the specific INCOME. Meaning, my tax authority wants to know, what is the respective service I did for (lets just assume an x amount) those $1000 ? 

I can not assign specific clients or jobs to this $1000 because it just gets transferred by Upwork and deducted from my overall balance. Shall I issue a ficitional invoice that just covers the exact amount as per my bank account (deducted by transaction fees etc.)?

 

Respectively: do my ("fake") invoices need to correspond with the amount that I get transferred onto my account? Because income tax law in Austria says my income happens in the moment I actually RECEIVE money for it, not when I just issue an invoice. The client could not pay the invoice, thus I would not have an income to report for tax... 

 

This is where my worries come from, since Upwork does not provide anything as a statement based on your Payment cycle.

 

Thank you for support!

Sandra

Community Guru
Joachim M Member Since: Mar 23, 2015
257 of 316

@Sandra L wrote:

Hello,

 

may I also ask a question in addition to the above explained method to simply issue your own invoices (as freelancer, in my case I have my own VAT number from Austria) to your clients, no matter if you send them or not, just to have your bookkeeping clean. 

My issue is, that I did not request payment from Upwork for a long time now, waiting for my official VAT number and companies bank account. Now I did transfer a substantial amount (covering a couple of months and several clients jobs) and have to report the specific INCOME. Meaning, my tax authority wants to know, what is the respective service I did for (lets just assume an x amount) those $1000 ? 

I can not assign specific clients or jobs to this $1000 because it just gets transferred by Upwork and deducted from my overall balance. Shall I issue a ficitional invoice that just covers the exact amount as per my bank account (deducted by transaction fees etc.)?

 

Respectively: do my ("fake") invoices need to correspond with the amount that I get transferred onto my account? Because income tax law in Austria says my income happens in the moment I actually RECEIVE money for it, not when I just issue an invoice. The client could not pay the invoice, thus I would not have an income to report for tax... 

 

This is where my worries come from, since Upwork does not provide anything as a statement based on your Payment cycle.

 

Thank you for support!

Sandra


Well Sandra,

 

Upwork is not your client but a service provider, with regards to payments a payment service provider much like a bank. You have to issue your invoices to your clients and they should show the same amount as the invoices Upword issued. 

Active Member
Julia D Member Since: Dec 27, 2014
258 of 316

Hi Joachim,

 

First of all thanks for your kind replies to all of us in this matter.

 

I'm a graphic designer from Spain, operating as a business with my ID tax but I have not VAT ID. That was not a problem with my clients being from outside EU.

I've been reading all the threads relative to VAT between EU countries and now that I have some EU clients I was sure I needed to apply for a VAT ID or do a lot of extra paperwork to pay the taxes in their country and have compliant invoices.

 

But with this answer I am totally confused now:

 


@Dennis K wrote:

@Joachim M wrote:

 

You should issue your own invoices. Whether or not you send it to your customer you need to discuss with them. Only my EU customers require my invoices. All the others are happy with what Upwork provides.

 

I even don't know if my European clients have a VAT ID, but I understand that the Reverse Charge (where my invoice amount is my company's net income) can be only applied when both parties have a EU VAT ID.

 

Not true. As you are supplying a service, not goods you don't necessarily need your customer's VAT ID. It has to be a commercial customer though. With commercial customers the tax authorities don't really care that much, they can deduct the importation VAT anyway from the VAT they charge.

 


 

So I simply issue an invoice with Reverse Charge and without client's VAT ID of my EU clients?

Yes. That's what I do and no complaints in all these years so far. Revenue service also accepted everything.

 

 

 

Do you mean that, as long as my client is a commercial customer, I really can send an invoice with no VAT at all?

And then could I report to my tax authorities my income as VAT exempt as I do with the other non EU clients income?

That would be great news because as long as I have no control over how Upwork handles my invoices I would prefer not go give my VAT ID and plus this will avoid me a lot of paperwork and raising my rates to include VAT costs.

 

I read the info in the links you provided and looks like the difference between goods and services is crucial here. I just would like to confirm it.

 

Thank you in advance!

 

Julia

Active Member
Marie N Member Since: Oct 25, 2016
259 of 316

Hi - Joachim M wrote: Not true. As you are supplying a service, not goods you don't necessarily need your customer's VAT ID. It has to be a commercial customer though. With commercial customers the tax authorities don't really care that much, they can deduct the importation VAT anyway from the VAT they charge. (...) Yes. That's what I do and no complaints in all these years so far. Revenue service also accepted everything. Have a look at the simplified  invoice on the bottom of the page: http://ec.europa.eu/taxation_customs/business/vat/eu-vat-rules-topic/vat-invoicing-rules_en

 

According to my local tax authorities (Ireland) a simplified invoice may be issued once:

  • the amount of the invoice is not greater than €100
  • A simplified invoice cannot be used in relation to a supply of Intra-Community goods or services.

For all higher amount I have to issue an invoice indicating the VAT number of the client I supplied the service to (inside the EU AND outisde the EU) to be able to 1) prove the client is a company (outisde the EU) and 2) it will provide proof to allow a right todeduct VAT in whichever EU country is concerned.

 

If the client I supplied the service to does not answer to my several requests for his/her VAT no. how can I proceed? Could Upwork give us a way to get a copy of the invoice they send to the client if their VAT no. appears on it? It will prevent me from working with customers on Upwork soon which is a pitty because I love the Upwork platform - it is so useful to make sure we get paid for example. But it means that each time I apply for a job I need to ask the hiring person to provide his/her VAT no. It's ridiculous and will never work. What do you think? How do you proceed? Anyone from Ireland who can help please?

 

Many thans in advance.

Kind regards,

Marie

 

Community Guru
Joachim M Member Since: Mar 23, 2015
260 of 316

Marie N wrote:

Hi - Joachim M wrote: Not true. As you are supplying a service, not goods you don't necessarily need your customer's VAT ID. It has to be a commercial customer though. With commercial customers the tax authorities don't really care that much, they can deduct the importation VAT anyway from the VAT they charge. (...) Yes. That's what I do and no complaints in all these years so far. Revenue service also accepted everything. Have a look at the simplified  invoice on the bottom of the page: http://ec.europa.eu/taxation_customs/business/vat/eu-vat-rules-topic/vat-invoicing-rules_en

 

According to my local tax authorities (Ireland) a simplified invoice may be issued once:

  • the amount of the invoice is not greater than €100
  • A simplified invoice cannot be used in relation to a supply of Intra-Community goods or services.

For all higher amount I have to issue an invoice indicating the VAT number of the client I supplied the service to (inside the EU AND outisde the EU) to be able to 1) prove the client is a company (outisde the EU) and 2) it will provide proof to allow a right todeduct VAT in whichever EU country is concerned.

 

If the client I supplied the service to does not answer to my several requests for his/her VAT no. how can I proceed? Could Upwork give us a way to get a copy of the invoice they send to the client if their VAT no. appears on it? It will prevent me from working with customers on Upwork soon which is a pitty because I love the Upwork platform - it is so useful to make sure we get paid for example. But it means that each time I apply for a job I need to ask the hiring person to provide his/her VAT no. It's ridiculous and will never work. What do you think? How do you proceed? Anyone from Ireland who can help please?

 

Many thans in advance.

Kind regards,

Marie

 

Hi Marie,

The German tax authorities have meanwhile caught up. For delivery of services within the EU they now insist on a VAT ID otherwise I have to charge my local VAT. No exceptions any more.
For deliveries outside the EU there just has to be some proof that the client really is outside the EU. There is no requirement to prove that the client is a business. Point your tax advisor to  http://europa.eu/youreurope/business/vat-customs/cross-border/index_en.htm
Naturally this affects my proposals. I now add the following text to all my proposals going to clients within the EU:
I would like to point out that the price quoted includes 19% German VAT. Should you provide me with your full address and your valid VAT number BEFORE awarding the job I will deduct the VAT from the price and amend my proposal accordingly. Please note: To be valid your VAT number must pass the EU's VIES system  (http://ec.europa.eu/taxation_customs/vies/).
So, you don't have to leave Upwork, you just have take the VAT situation into account. I don't see Upwork giving us access to the invoices they raise on our behalf any time soon. They wanted to do that early last year and nothing has happened. And, we don't necessarily need it, we just have to quote including VAT. Then it's up to the client to provide the necessary details. He doesn't do it, he pays the price including VAT.